WD Resumes Production of Hard Disk Drives in Thailand

Western Digital Corp. on Friday said that this week it resumed production of hard disk drives (HDDs) in one of its factories in Thailand ahead of schedule. The company expects to restart production of HDD head sliders in Q1 2011. Besides, the firm said its profitability – with the exclusion of the “unusual costs” and “arbitration decision” will be higher than expected.

WD restarted production of hard drives this week in one of its buildings in Bang Pa-in (BPI), Thailand, one week ahead of internal schedules. This facility had been submerged in some six feet (1.8 meters) of water since October 15, the estate was pumped dry on November 17, main power was restored on November 26 and production restarted November 30.

The company removed all submerged slider manufacturing equipment from the BPI facilities for assessment, decontamination and refurbishment and has commenced decontamination and restoration of its remaining buildings in BPI.

Western Digital expects to recommence head slider production in BPI in the Q1 2012 quarter (Q3 FY2012) and also begin production in a new WD slider fab location in Penang, Malaysia, in the same time frame.

The company's other Thailand hard drive facilities at Navanakorn remain under approximately two feet of water. The industrial estate is expected to be pumped dry within ten days at which point the work of decontamination and refurbishment will commence.

“The passion, perseverance, ingenuity and execution exhibited by the WD team has been extraordinary and enabled us to make substantial progress in partially restoring our operations in Thailand, well in advance of our earliest expectations when the floods hit. Much work remains to be done but we couldn't be more pleased with the effort and results thus far, including tremendous support from our supply partners and strategic customers,” said John Coyne, president and chief executive officer of WD.

For the December quarter, the company now expects revenue of at least $1.8 billion and gross margins above the high end of its business model range of 18% to 23%, and operating expenses of approximately $265 million, exclusive of unusual charges related to the floods, acquisition-related expenses and litigation. Unusual charges related to the floods are expected to be in the range of $225 million to $275 million for the December quarter, exclusive of any insurance recovery. The company expects to file a property damage claim of at least $50 million and an additional claim for business interruption during the December quarter. The accounting treatment of these claims is dependent on their status as of the end of the quarter. The company expects acquisition related charges in the December quarter of approximately $15 million.